The Himalayas are the source of freshwater to about one-fourth of the world’s population. Paradoxically, water scarcity is one of the most prominent climate crises in the Himalayan region in general and its cities in particular. Rapid urbanization coupled with climate change is causing the rapid disappearance of natural springs resulting in water shortage in the urban areas. Governments are investing in new water supply projects to fulfil the demand of city residents as existing water sources are drying up. Solely focussed on establishing the physical infrastructure to supply water from source to users, and these drinking water projects have by and large failed to protect the water sources. These projects rely on the assumption of a fixed quantum and quality of the water source not taking into account the impacts of changes in climate and the activities of upstream communities on the ecosystem. For sustainability of the drinking water supply, it is necessary to have subsidiary plans that bring together the upstream water source communities (service providers), downstream communities (service users) and the local authority. Incentive payment for ecosystem services is a strategy to incentivize upstream non-user or low-user communities, whose role is critical in maintaining and improving the water supply and preserving the watershed area. This chapter highlights practical aspects of the design and implementation of incentive payment schemes drawing on research from three case studies from three small Himalayan towns in Nepal.